It’s been a bit grim down on the farm lately, hasn’t it? What with BSE, foot and mouth disease, low commodity prices and CAP reform, traditional farming families have been abandoning the land faster than you can say combine harvester. What is surprising is who is buying them out.
Step forward the high-flying sophisticate with money to spend on landscape, Highland cattle and organic goodness — and often more accustomed to pinstripes than ploughshares.
For the past 18 months, the market for farmland has been doing very nicely, thank you, driven by what estate agents call “lifestyle purchasers”.
“Whenever there is a boom in the economy and wealth is generated, one of the assets that successful men want to buy is part of the country,” says James Laing, a partner at the high-end estate agency Strutt & Parker. “It has been going on since the Industrial Revolution.”
Right now, it is going on more than ever. Across Britain, buoyed by bonuses and high price growth in prime central London in particular, City types are pulling on their wellies and snapping up farms.
Estate agency Knight Frank’s latest farmland review, for the second quarter of 2006 and released today, reveals overall demand for farmland (defined as agricultural land with a dwelling and outbuildings) increased by 42% on the same period last year.
Farmland prices rose by 4.3% in the three months to the end of June to an average £4,043 an acre — slightly outstripping the 3.9% increase in the cost of the average country house (usually defined as a large house standing in extensive grounds, and with a private drive).
About 40% of farm sales were to non-farming individuals; the most popular locations and those that have seen the strongest price growth are Hampshire, Oxfordshire, Wiltshire, the M3/M4 corridor, the M40 corridor, Herefordshire and west Berkshire — tellingly, all with good City access.
“The fortunes of the City continue to heavily influence the farmland market,” says Clive Hopkins, head of farms for Knight Frank. Although 35% more farmland came on the market in the second quarter of this year than in the equivalent period of 2005, demand still far outstrips supply.
Strutt & Parker says more than half the 33,645 acres it sold in England in the first half of 2006 went to “lifestyle purchasers”; up nearly 70% on last year.
“You’re definitely seeing people from a non-agricultural background buying in,” says Jim Bryant, rural buyer for Bidwells, Britain’s largest independent firm of property consultants outside London. “Hedge-fund managers, financiers — they are all looking for that country house with a big garden, and deciding to get a really big garden; also people who have made a lot of money floating something, perhaps, and who see the financial pluses of buying agricultural land and running it as a more commercial operation.”
Last month saw frantic competition by City heavyweights for the 4,000-acre Clarendon Park estate, three miles east of Salisbury, in Wiltshire. In the year’s largest private farm sale so far, it went for more than £30m to Marc Jonas, 37, a former Hambros investment banker and property specialist who co-founded Punch Taverns and is now director of Sun Capital, the private equity group.
It is easy to understand the appeal of life on the farm. Buyers, fearful of crack dealers at the urban school gates, want their children to grow up in Famous Five-ish surroundings, climbing trees, gambolling with lambs and guzzling lashings of ginger ale — sourced, no doubt, from a suitably chichi organic farm shop.
The brioche-winner of the family — they can scarcely be called a breadwinner at this level — increasingly finds that they can run a company remotely, thanks to broadband and integrated computer networking.
Oh, and there might even be a tax break or two, as their accountant has no doubt quietly pointed out, but more of that later.
Jody Scheckter, the South African-born 1979 Formula One champion, is a nouveau-farmer; indeed, he was one of the sector’s pioneers. After retiring from racing in 1980, he moved to America, where he made a fortune in firearms training systems. He and his second wife, Clare, returned to Britain in 1996, and bought 500 acres in Hampshire.
“It just started as a hobby,” says Scheckter, 56. “I wanted the best-tasting, healthiest food for myself and my family.” He also remembered farm holidays he had spent as a boy. But, as with some of the other restless millionaires who have started streaming to the country, he wasn’t satisfied with merely dabbling with agriculture.
Two years ago he built up his landholding into what is now a 2,500-acre estate; his hobby has become a “passion and a disease”, and he’s accumulated about 500 books on organic farming. You name it, Laverstoke Park grows or rears it: fruit, vegetables, grapes, hops, animals — it has the largest buffalo herd in the country.
“We are now beyond biodynamic,” boasts the man whose compost heap covers four acres.
Elizabeth Hurley, the actress/producer and model, has a growing love affair with Ampney Knowle, the £2.7m Cotswold estate she bought two years ago, and where she, her son, Damian, 4, and boyfriend, Arun Nayar, spend most of their downtime.
“We’ve got 400 acres, we’ve got chickens, we’ve got sheep, we’re getting cows and we’ve put the farm into an organic conversion,” Hurley has said.
So what is the urban farm buyer looking for? Eastbury Manor, 900 acres of rich Berkshire arable land and watermeadows, is a good example, judging by the bidding war that broke out when it went on the market for £6m through Strutt & Parker last month. It was finally snapped up for an undisclosed sum by a businessman who outbid at least four financiers. With the land came a Grade II*-listed manor house, cottages, a shoot, an eight- furlong, all-weather gallop and part of the Lambourn chalk stream. In short, all that a man — or woman — with capital could need in the country. That’s great value, considering the kind of country house you could expect for the same money. Why not go the whole hog, then, and buy a farm? So what is the difference between a “country house” and a farm, apart from the fact that the farmhouse itself is more likely to be rambling than rococo? Quite simply, to qualify as a farm the land must actually be used for commercial agriculture rather than for shooting or for a stroll with friends.
In some cases, though, you can get the best of both worlds by buying a farm and expanding your modest farmhouse into a substantial country pile.
Take Kittyhawk Farm, for sale with estate agency Humberts, two miles from the East Sussex village of Ripe. Glyndebourne is six miles away, so on a summer night the opera is almost within earshot.
The price is £1.5m. For that you get 105 acres of prime grazing land, a three-bedroom Victorian farmhouse, two grass runways, an aircraft hangar, seclusion and magnificent views of the South Downs. The real icing on the cake is it comes with full planning permission for a new country house of about 4,700sq ft, chock-full of eco- features such as geothermal heating.
“The cleverer thing is to turn a commercial setup into a residential estate,” says Andrew Macpherson, a director of CKD Kennedy Macpherson, a property consultancy. “It is amazing what you can achieve in 10-15 years by planting trees. Something ordinary becomes something pretty special. However, in my experience, most City buyers are looking for a more instantaneous effect, even though they might be quite young.”
All you have to do is keep farming — you could lease grazing land to a neighbouring farmer, for instance — and you have acquired a country pile for far less than you would pay otherwise.
“These guys are good businessmen,” says Justin Marking, head of farms and estates for buying agency Prime Purchase. “They do understand an account.”
They also understand the favourable financial implications for inheritance tax and income tax (see below), which can be one of the main reasons people are attracted to buy in the first place.
Once you have your farm, it can make good economic sense to keep adding bare farmland (land without a dwelling), which sells at an average £3,000- £3,500 an acre.
“There are a lot of financial guys looking at the figures, some City names, and investing in land,” says Crispin Holborow, head of Savills’ country department.
“Oil-seed rape has gone up, winter wheat is selling at £80 per ton, compared with £50 last year,” he says. “There’s a feeling that land values and farm prices will do the same thing. An increasing number of bioethanol processing plants are in the offing, opening a new market for grain.” So bonus-rich City types who bought farms as a jeu d’esprit, out of love for the English countryside and to hell with the balance sheet, may well find they make as much money out of their “hobby” as they would in the boardroom.
Sickening, isn’t it?
High finance down on the farm
The benefits of owning a farm aren’t confined to the bucolic idyll it offers. It can also offer substantial tax benefits as well.
Take inheritance tax (IHT). Provided authorities are convinced that you are running the farm as a genuine commercial venture, then you should be able to pass it to your heirs entirely tax free. This should normally include the farmhouse, as well, although there are exceptions. IR Capital Taxes, the branch of HM Revenue & Customs (www.hmrc.gov.uk) that deals with such matters, is understandably keen to clamp down on people who try to pass off their country houses as farms and will deny the relief if your dwelling is too grand. Taking detailed legal and financial advice is crucial.
There is also capital-gains tax relief: if you make a gain on a business asset, you are taxed at 40%, but if you roll over the proceeds into another farm or business, you should be able to avoid this.
If you fund your purchase with a mortgage, then you can offset the interest you earn against the tax on your profits. You will not get relief on the interest on your farmhouse, though, so you will have to be able to prove the money was used to buy the land.
And then, of course, there are a variety of grants. Provided you keep the land in good “agricultural and environmental condition”, you are eligible for the single farm payment, which averages £70 an acre. The Rural Payments Agency (www.rpa.gov.uk) has details.
You still may get all the tax breaks and not actually have to do the farming if you hire a contractor, provided you still take the decisions.
On the market
Fourteen miles from Oxford, the 600-acre Old Chalford Estate is for sale for £6.5m. As well as the main six-bed house, the estate has a three-bed cottage, 15 outbuildings for arable and livestock farming, a pond and a helipad. Savills, 020 7499 8644, www.savills.co.uk
The Chilworth Farm estate, eight miles south of Oxford, has 402 acres, a seven-bed farmhouse with a pool and several outbuildings, including two offices. It is for sale for £4m with Knight Frank, 01865 790 077, www.knightfrank.com
A 267-acre arable farm, the Alrewas Hayes estate has an eight-bed Queen- Anne farmhouse, three cottages and 21,000sq ft of barns. It is five miles from Lichfield and 19 from Birmingham. It is for sale for £3.15m with Knight Frank, 0121 200 2220, www.knightfrank.com
Set in 41 acres laid out to pasture, Limbury, in Salway Ash, is three miles from Bridport in Dorset. It has a six-bedroom farmhouse, a two-bed cottage and a range of outbuildings, and is for sale for £1.35m with Humberts, 01308 422 215, www.humberts.co.uk
Clive Aslet is editor-at-large of Country Life
Additional reporting: Helen Davies
Kittyhawk Farm is on the market for £1.5m with Humberts, 01273 478 828, www.humberts.co.uk
